Category: Egyptian stock exchange
There have been some anticipated negative movements for the Egyptian Exchange in recent weeks. Experts in the field have suggested that the EGX could likely encounter “difficulties in attracting foreign and Arab investors in the upcoming period,” caused by performance as well as the competition posed by Gulf stock markets in targeting investors.
If – as is expected – Gulf markets are opened up to foreign investors and trade restrictions on foreign institutions are eased, the Egyptian Exchange will have to provide something else. For example Kuwait is offering a capital gains tax exemption to foreigners. This will not be offered in Egypt now until May 2017. These are just some of the factors that have resulted in Egypt losing its “competitive edge in attracting foreign investors.” When other regions offer more, Egypt loses out. Especially given the fact that Egypt has been levying new taxes on profits. Nonetheless there was still an EGX 30 increase by 0.79 percent.
According to El Marwa Brokerage’s head of research and investment, Mohamed Elnagar, the rally Egypt is experiencing today is actually not an indication of a “real recovery,” given the fact that foreign institutions are strongly being pressured to sell. He further added that for the market to properly recover, the way oil prices go and how global markets perform will be most telling. It has to be noted also that simultaneous to Egypt’s rally are the Gulf rallies.
Also according to its web site, the Egyptian stock exchange at the beginning of the year encountered substantial losses “due to lower global exchanges,” but with the promotion of the bourse, there was some improvement.
The debate about whether or not to privatize the Egyptian stock exchange has been on the table for some years. Currently, there are no immediate plans to go ahead with this. According to Mohamed Omran, Chairman of the Egyptian Exchange [EGX], there are no such plans “in the next 25 years.”
The largest exchange in the region, the EGX is “a strong and stable government institution [one of Arab’s] most open…with governing rules and regulations” being seen as the “best in the region.” So why even bring privatization to the table if things are going well? Surely if it’s not broken…
Has the global atmosphere changed that much in the last decade that what Shahira F. Abdel Shahid stated in a paper at the time become irrelevant? In the ‘Social Science Research Network,’ in August of 2004, she said that due to the abundant fluctuation in various industries impacting stock exchanges globally, the “cumulative effect of these developments and trends pose fundamental challenges and threats to the continuance of the ‘classical’ stock exchanges.”
In addition, by having private shareholders getting a piece of the EGX, the EGX has a greater chance to “respond and adapt quickly to a fast-changing marketplace.” And, it “later facilitates mergers/alliances with other exchanges.”
This philosophy was echoed recently by Omran who said (in addition to his views about why the EGX should not be privatized) that there does need to be “cooperation between the EGX and the country’s private sector [given the fact that] partnerships with private institutions over the exchange and development of expertise ‘could possibly happen’ in future.”
It should also be noted that the bourse is not where it needs to be, following the impacts of the global financial crisis along with the region’s political unrest that was compounded by the ousting of two presidents in the space of less than three years. While the EGX managed to stand up to this pressure on some level, it could still have fared better.
For now, it looks likely that the EGX will not undergo privatization. But there seems to be good reasons to think about for the future.
After approximately seven weeks of silence, the Egyptian stock exchange is finally back on its feet. As expected, the first few days were difficult, as shares fell and sent the benchmark index to a 23 month low. Many international investors sold holdings to free money that had been locked up for the almost two month duration.
EFG-Hermes Holding SAE, for instance, the nation’s biggest investment bank, went to the lowest point since July 2009. In general, international investors, including Arabs, sold US$28 million.
Mohamed Abdel Salam
In addition, the head of Egypt’s stock market, Mohamed Abdel Salam, recently announced that the exchange was suspending the trading of 46 companies. These companies have failed to meet disclosure requirements that ask them to disclose if they have assets or shareholders under investigation.
Press Conference News
As Abdel Salem said in a televised press conference on state television, “The market has been closed for almost 60 days, so we required all companies to tell us how they’ve been affected and if they have shareholders under investigation.”
Those in the know predict that the market will continue to fall for a bit, as investors try to exit positions from the lock up period.